Waiver of Sovereign Immunity from Execution: Arbitration is Not Enough

Abstract

A continuing controversy in international commercial arbitration concerns the right of a private party to an arbitration to execute an award against a recalcitrant state party, despite the advent of the doctrine of restricted immunity, which, seemingly applies only to waiver of jurisdiction, not execution. The problematic issue is the extent to which, if at all, a state that has waived sovereign immunity from jurisdiction, has also waived immunity from execution – in effect from enforcement of an arbitral award by attachment of its sovereign assets. In a sign that the old order may be changing some courts have have been willing to hold that consent by a state to arbitration implies waiver of immunity from execution as well as from jurisdiction. The issue was recently tackled by the Hong Kong Court of First Instance, in FG Hemisphere Associates LLC v Democratic Republic of Congo ('FG Hemisphere'). Reyes J provides a useful survey of the current wisdom on the state of acceptance of the restrictive theory of immunity, as well as the likely trend. He further discusses the question of just what is a “commercial” transaction that would be encompassed within a restrictive immunity approach, finding that a labeling of a transaction as such by the parties was not necessarily sufficient. Importantly for the purposes of this article, his Honour looked at what might constitute waiver of sovereign immunity, particularly with respect to immunity from execution in the context of enforcement of an arbitral award against a state, finding that participation in an arbitration, including agreement to arbitral rules requiring satisfaction of an award, was not sufficient to constitute waiver of immunity from execution in itself. This paper discusses the issue of waiver of sovereign immunity from execution with respect to arbitral awards, using the decision in FG Hemisphere as a useful starting place.